Global Crisis/Innovation Blog

Global Crisis as an Oil Spill: Let’s Help Nature and Evolution

By Shlomo Maital


Oil eating bacteria

BBC reports today that the army of scientists researching the oil spill in the Gulf of Mexico have found that oxygen levels in the Gulf (normally excessively high after an oil spill dumps tons of hydrocarbons into the water) have not risen as much as expected.

Why?   It turns out that deep in the Gulf, oil-consuming bacteria have been proliferating rapidly and have been gobbling up the bad sticky goo.  Normally, such bacteria are few and far between. But suddenly, when their food supply expands a thousand-fold, they leverage their bounty by multiplying.   It is Nature’s way, and evolution’s way, of dealing with nasty surprises.

When the sticky oil has been eaten up by the bacteria, who transform it into energy needed to grow and to reproduce, the existing bacteria will run out of food.  They will die off, and their numbers will fall back to what they were before the oil spill.

It occurs to me that the Global Crisis 2007-9 is very similar.  Financial services firms of all kinds (Fannie Mae, AIG, Goldman Sachs, speculators, hedge funds, private equity, VC’s) all proliferated, like bacteria, when their ‘food supply’ suddenly became rich and plentiful (booming capital markets fed by the ‘oil spill’ of Alan Greenspan’s low-interest come-and-get-it-while-you-can money and credit).

Now that ‘food supply’ has dried up, mostly, and all those ‘financial services bacteria’ (no, I will not call them ‘germs’) will perforce shrink and decline, as they should.  At least, they will, if we behave rationally.  If we act to preserve them, as Geithner and Obama have, we are simply creating another oil spill, probably a worse one.

Often, after terrible wildfires, Nature appears utterly destroyed, burned.  In an amazingly short time, green shoots appear; indeed, some plants and trees need the fire in order for their seeds to germinate.   Similarly, in the Global Crisis, those green shoots can and will reappear, if we let them. But if public policy is bent on preserving the deadwood, there will be no air and water and earth for green shoots.